BlackRock Suggests Fed Keep Rates Steady, Focus on Warsh's Speech

On September 16, Gargi Pal Chaudhuri, BlackRock's Global Chief Investment Strategist, stated that the Federal Reserve should keep interest rates unchanged at the current range of 3.50% to 3.75% during this meeting. Although the market has raised the probability of a 25 basis point rate hike to 93%, she believes that underlying inflation in the U.S. is cooling down, with the core CPI rising by 0.3% month-over-month in August, and the year-over-year growth rate dropping from 3.1% last year to 2.4%. Chaudhuri pointed out that if the Fed chooses to raise rates, it would not be due to runaway inflation, but rather because rising oil prices have increased the upside risk to inflation. She emphasized that investors should pay attention to the statements made by Fed Chairman Kevin Warsh after the meeting, including the threshold for the next rate hike, the impact of oil prices, and adjustments to the core PCE statistical methodology. She believes the key factor is whether oil prices have changed the Fed's policy response mechanism. In terms of asset allocation, Chaudhuri noted that the hedging effect of the traditional 60/40 stock-bond portfolio has weakened, and she recommends allocating to growth assets, income-generating assets, and low-correlation assets. In equities, she suggests focusing on AI infrastructure, companies with commercial viability, and defensive quality assets, with a more favorable outlook on emerging markets in Asia, and recommends utilizing the current higher yields to allocate fixed-income assets at the front and middle of the yield curve.

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